Has The Inclusion Of Forward-Looking Statements In Monetary Policy Communications Made The Bank Of Canada More Transparent?

To investigate the extent to which the transparency of the Bank of Canada's monetary policy has improved, the authors examine empirically - over the period 30 October 2000 to 31 May 2007 - the reaction of Canadian financial markets to official Bank communications, and in particular their reaction to the recent inclusion of forward-looking policy-rate guidance in these communications. The authors find evidence that Fixed Announcement Date (FAD) press releases, and, to a lesser extent, speeches by Governing Council members, significantly affect near-term interest rate expectations, indicating that central bank communication conveys important information to market participants.

Provided by: Bank of Canada Topic: Big Data Date Added: Nov 2010 Format: PDF

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